Judge gives bankrupt San Bernardino another chance: Editorial

San Bernardino went broke, nearly missed payroll, slashed city services and defied pension powerhouse CalPERS by suspending payments for a time. It has been maybe the darkest year in that city’s history — but the way forward is clearer now.

A federal judge on Wednesday granted San Bernardino bankruptcy protection as it begins to reorganize and put itself on a path to solvency. The hearing brought an end to the city’s year-long fight for Chapter 9 protection against the objections of creditors, namely the California Public Employees’ Retirement System.

Judge Meredith Jury was firm in her ruling, unswayed by CalPERS’ off-the-mark argument that the city was purposely “languishing” in bankruptcy with no desire to balance its budget. Jury said she could find no evidence the city was disingenuous in its motives, and why would she? The city has suffered a massive “brain drain” since its Aug. 1, 2012, bankruptcy filing, losing more than 300 employees. Jury also rejected CalPERS’ arguments that granting San Bernardino bankruptcy protection would entice other municipalities to “create” financial crises of their own to shirk their responsibilities. News flash: Cities are already in crisis.

For years, local government officials throughout California have given public employees more and more in the hope that their coffers would stay strong and support increases in pay and benefits. Cracks in those coffers started to show following the economic collapse of 2008, but by then city employees were reluctant to agree to cuts in pay and benefits. Now those cities are hoping to ride out the rest of the economic recovery using financial reserves and cutting back on services when possible.

So San Bernardino wins bankruptcy protection, but calling Wednesday’s hearing a victory would be wrong. There’s nothing triumphant about a municipality going to court looking for relief from its creditors.